Family Law Hub

R v R & Others [2013] EWHC 4244 (Fam)

An injunction which restrained the husband from directly or indirectly engaging in any business that competed with the family company was to remain in force.

In brief: An unusual case concerning an injunction against the husband ("H") in financial remedy proceedings to stop him competing against the family company (of which he was a shadow director).

This issue arose at the return date of a freezing order, made by Mr Justice Wood on 1 November 2013, which was heard before the President of the Family Division.

The parties had agreed that the freezing order should remain in place, subject to certain adjustments which were to be determined by the court and to other matters on which negotiations were continuing and for which a further hearing was fixed.

The issue though in this judgment related to a successful family business, a matrimonial asset, which was run by both H and W throughout their marriage and which was still in business.

The freezing order contained an injunction restraining H from directly or indirectly engaging in any business competing with the family company or soliciting customers, or attempting to sell, license or provide the same services. W contended that this paragraph should remain as H was deliberately competing with the family business in an effort to depreciate the value of this matrimonial asset. H contended that this paragraph should be discharged on the basis that he hotly denied doing such a thing.

The President determined that the court should proceed on the basis that there was sufficient factual foundation for W's concerns. The issue put to W's counsel was – is there an appropriate legal basis for the continuation of this injunction?

However, for it to be so, the circumstances supporting the making of the injunction had to be such that it would also be granted in a different Division of the High Court – in other words, there would have to be a cause of action against H which could give rise to the need for an injunction.

Finding for W, the President held that there was a legal basis for this injunction and that was grounded in H's own evidence that he was a "shadow director" of the family company.

As such, the President reiterated that H owed a fiduciary "duty of good faith and loyalty", and could "reasonably be expected to act in the company's best interests rather than his own separate interests when giving such directions" – (Vivendi SA & Another v Murray Richard & Another [2013] EWHC 3006 (Ch)).

Thus it would be in breach of his fiduciary duty to the family company for H to set up and operate a competing business (if indeed he had or was in the process of doing so) and therefore, there was an appropriate cause of action which could give rise to this injunction.

In any event, as the President highlighted, the order would apply only to a "competing business" and if H was not running such a business, as he contended, then he had nothing to fear from the order being made, and his business activities would not be unduly fettered. If he was, as W contended, then it was right that he should be restrained as it would be in breach of his fiduciary duty.

Case note, published: 18/02/2014

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An injunction which restrained the husband from directly or indirectly engaging in any business that competed with the family company was to remain in force. The judge said that if it did not compete (which the H alleged) then there was nothing in the injunction which in any way fettered the operation of that company. If it did compete, then it was right that there should be an injunction because by operating a competing business he would be in breach of his fiduciary duties as a shadow director of the family business.Judgment, 14/01/2014, free

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